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Emergency Long-term Unemployment Insurance Must Be Extended

January 13, 2014

With a volatile
economy and job losses rooted in the recession, unemployment insurance has
become vital to families across the country. Millions of workers have lost
their jobs and turned to UI to help take care of their families. Long-term
unemployment is at its highest level since World War II, but Congress failed to
renew long-term unemployment benefits, also known as emergency unemployment
compensation (this program provided up to 47 weeks of supplemental unemployment
insurance payments to jobless people looking for work) in the budget deal it
passed just before adjourning for the 2013 winter recess.

Thus, 1.3
million Americans lost their last lifeline from the federal government when
long-term jobless benefits expired on December 28, 2013. Anyone who has been
collecting unemployment for more than 26 weeks loses benefits immediately.
Several million more people will lose their benefits over the course of the
next year as they hit the limit allowed by their states. The Obama
Administration estimates that by the end of 2014, absent any new legislation,
about 4.9 million people will have been affected. Allowing the program to
sunset is expected to have wide-scale ramifications for the economy at large,
axing job growth by around 300,000 positions in 2014 and pushing thousands of
households to the brink of poverty.

Brief History of UI

In regular
times, the federal government and the states jointly provide up to 26 weeks of
unemployment benefits, paid from employer payroll taxes, to people who lose
their jobs. This idea, which dates from the 1930s, is to help laid-off workers
until they can find new jobs. During periods of high unemployment—for example,
during recessions, which have occurred at least once in every decade starting
in the 1950s—the federal government has expanded unemployment insurance with
money from the general fund. Recently, in June 2008, when the recession was
young and the unemployment rate was 5.6%, Congress approved a 13-week
extension. As the recession deepened, Congress passed additional expansions. It
has been scaled down gradually ever since.

As of
December 28, 2013, unemployment benefits revert to what is normally provided by
the states—26 weeks—depending on the number of weeks worked in the claim year. The
states with significantly higher-than-average percentages of long-term
unemployed people are California, Nevada, Illinois, Pennsylvania, Connecticut,
New York, New Jersey and Massachusetts.

Is Congressional Extension a Strong
Possibility?

Democrats pushed
for another extension, but most Republicans opposed the idea, resulting in a
stalemate. President Obama, who faulted Congress for inaction on the issue,
called on members of Congress to make the temporary extension of benefits
“their first order of business” when they return from their winter recess later
in January 2014. The prospects for getting the bill through the
Republican-controlled House, however, appear dim. Republicans have advanced
three arguments:

The extension was always supposed to
be temporary and now that unemployment has dropped to 7%, it is time to go back
to the basic of up to 26 weeks of coverage.

Extending benefits for an additional
year would cost approximately $25 billion, which would be added to the federal
deficit.

Some argue that extended unemployment
benefits provide a crutch that discourages people from looking for work.

Democrats
and a few Republicans, however, respond with three major arguments of their
own:

Even though the overall unemployment
rate has dropped, problems faced by the long-term unemployed remain grim – far
worse than in any previous recession since the end of World War II.

Benefits do not deter people from
looking for work. The problem is that jobs remain hard to find and companies
often discriminate against people who have been unemployed a long time.

Injecting money into the economy
through unemployment benefits spurs growth as recipients buy goods and
services.

Federal
Reserve Chairman, Ben Bernanke, made the last point in a recent news
conference, saying that fiscal policy was too tight and that the economy would
produce more jobs if Congress eased up for the time being.

NETWORK will
continue to work with its partners on extending UI benefits, both in terms of
duration and amount of compensation.